What is the role of the primary financial market?
The
primary market assures(insures) two essential functions(offices) in an
economy: the financing of the economic agents and the
allowance(allocation) of the resources:
The
financing of the agents: the primary market fills(performs) a
function(office) of financing of the economy. He allows to reconcile the
needs for the lenders and for the borrowers. Three categories of
broadcasting stations(issuers) of titles(securities) (borrowers) operate
on the primary market: companies, the State and local authorities as
well as financial institutions:
Companies: the primary market allows the companies to obtain the
capital which are lacking to them to finance an investment. In return of
the meditative capital, companies emit(utter) titles(securities) by
resorting(turning) to three modalities(methods): the initial public
offering, the increase of the capital and the bond issue
The initial public offering: the operation consists, for a
company(society) which wishes to reach the stock market, to sell to the
investors a part(party) of the actions(shares) making up(composing) the
share capital. The introduction is made through a public offering ( OPV)
and thus comes along with an opening of the capital of the
company(society) to the public.
The increase of the capital is an operation which consists for a
company(society), to increase the amount of its share capital by new
contributions. For that purpose, the company(society) emits(utters) new
actions(shares), sold to investors.
The bond issue: only the big companies(societies) can emit(utter)
obligations(bonds) in stock exchange(grant). They have to offer rates
higher than States. The rates are raised(brought up) all the more as the
"notation" given by rating agencies is lower.
The State and the local authorities: States emit(utter) long-term
bonds (beyond five years) to fill their budget deficits. They are the
comparable obligations(bonds) of the treasure ( OAT). Furthermore,
States emit(utter) short obligations(bonds), Treasury bonds, to finance
their needs for finance due to the gap between their recipes(receipts)
and their spending(expenses). The loans of States are considered as the
titles(securities) the safest(surest) of the market.
The financial intermediaries: to get itself resources, the financial
intermediaries resort(turn) to capital markets. They can emit(utter) on
the financial market of the obligations(bonds), actions(shares) or
hybrid titles(securities) (mixture of actions(shares) and
obligations(bonds)). For that purpose, they resort(turn) to the same
modalities(methods) as the companies.
The
allowance(allocation) of the resources: meeting place between the
supply and demand of capital, the primary market allows the
allowance(allocation) of the resources between the activities and
between the regional and national spaces. He allows to mobilize more
easily the national and foreign savings of the agents with capacity of
financing. He(it) facilitates the financing of the investments and the
innovation necessary for the economic growth.
